Close to half a million low-income homeowners in the United States, many of them minorities, are nearing the end of mortgage forbearance plans that allowed them to halt loan payments during the pandemic, presenting a test for the mortgage service firms tasked with helping struggling borrowers move onto payment plans they can afford.
The number of borrowers exiting the plans is expected to surge over coming weeks as people who signed up early on in the pandemic reach the 18-month limit for forbearance. While close to 80% of homeowners who entered programs at some point in the pandemic have since exited them, the remaining 20% tend to live in areas with higher shares of minorities, or have lower credit scores and lower incomes, research shows.
Their missed payments could add up to a "forbearance overhang" of more than $15 billion in postponed mortgage payments, or about $14,200 per person, according to Brookings Institution research.
"When coupled with unemployment insurance expiring and other things happening at the same time, it’s not clear that these folks will have an easy time coming out of this," said Amit Seru, a professor at Stanford Graduate School of Business and a senior fellow at the Hoover Institution.
